Mistake #1: Foreclosure. "I foolishly believed my attorney (and the rising real estate market) when I didn't force my former husband to refinance or sell our house during our divorce proceedings, and [he] left my name on the mortgage," Cynthia Burnham of Descanso, California says. As a result, when her ex stopped making payments, the bank came after her, and her credit score took a beating. Burnham is not exactly sure where her score stands today, but she recalls that it was in the high 700s before the fiasco began.The lower score hit her most severely when it came to her credit limits; she had one card's limit slashed from $14,000 to $2,000, while another one went from $5,000 to $2,000. "I've always been proud to maintain my credit as excellent," Burnham says. Having to deal with the fallout once her credit wasn't good anymore left her "irritated and angry." Shane Fischer of Winter Park, Florida, is also struggling with the fallout of a low credit score due to foreclosure. "The foreclosure killed any chance I have of getting a new car loan or even a credit card," Fischer says. "My car is getting older, and I'd like to consider trading it in, but with my bad credit, no bank will give me the time of day." Not surprisingly, foreclosure is the big kahuna when it comes to actions that can sink your credit score. According to Barry Paperno, consumer operations manager at FICO, "In addition to a foreclosure preventing someone from obtaining a new mortgage for at least a couple of years -- regardless of the score – this person could expect to lose anywhere from 80 to 160 points, depending on his score level prior to the foreclosure." Ouch. Foreclosure is a "scarlet letter," adds Gary Nitzkin, a debt-collection lawyer in Southfield, Michigan. Mistake #2: Being a guarantor on someone else's loan. Nitzkin, who is hired by creditors to collect on debts, says this is another no-no that's sure to take a bite out of your credit score. If the person you're guaranteeing the loan for - a child, close friend or other relative - defaults on the loan, you could be responsible for paying it back all at once. Not only would this likely cause significant financial hardship for you, you potentially could see your credit score plummet by as much as 100 points. Mistake #3: Making a late payment on a credit card debt. While foreclosure and debt settlements might sound like drastic steps, you may be surprised to learn that the next biggest credit-killer is actually something almost all of us have done from time to time. Making a late payment on a credit card debt doesn't seem like such a bad thing -- until you learn just how much it can affect your credit score. As Nitzkin explains, "If a consumer has a [score of] 750 or above and they're late with just one payment, their score can drop to 650." However, FICO's Paperno adds, someone who already has a few late payments on their report as a result of previous late payments would be more likely to lose less (somewhere between 60 and 80 points). Mistake #4: Maxing out one of your credit cards. While it may be surprising to find out a late payment can drop your score anywhere from 60 to 100 points, you might be even more shocked to learn that even actions that are allowed by lenders can hurt your score. "The act of maxing out a single card could drop your high FICO score by as much as 50 points," Paperno says. People with lower scores could see theirs drop by up to 30 points, although it's likely they'd have much lower minimums than their high-score counterparts. Mistake #5: Settling with a debtor for less than the amount owed. This is another major strike against your score that Paperno says can drop your credit score by as much as 160 points. While we've written about people who've settled their debts for less and found the option to be a godsend, it's important to keep in mind that this isn't an action without consequences. Reaching an agreement with a lender to settle a debt for less than what you owe can certainly free you from a crushing debt, but the trade-off is that you'll have a lower credit score to show for it. Getting - and keeping - your score high is an uphill battle for many people these days, Nitzkin says. "Lenders don't like to lend money to people who need it."
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